Mr. Edward Niño P. Puyod

November 25, 2008 BIR RULING [DA-(I-039) 461-08] 24 (D) (1), 188 Mr. Edward Nio P. Puyod Matina, Davao City Sir : This refers to your letter dated July 22, 2008, as indorsed by the Regional Director, Revenue Region No. 19, Davao City, requesting for an exemption from the payment of capital gains and documentary stamp taxes on your exchange of property with Brigida R. Cualing. acITSD Documents submitted show that you are the owner in fee simple of a parcel of land located in Matina, Davao City and covered by Transfer Certificate of Title (TCT) No. T-418640 containing an area of three hundred square meters (300 sq.m.) and particularly described as Lot 11, Block 23 of the consolidation-subdivision plan Pcs-11-000239. On the other hand, Brigida R. Cualing is the registered owner of a lot located adjacent to the aforestated property as evidence by TCT No. T-398486 and described as Lot 9, Block 23 of the consolidation-subdivision plan Pcs-11-000239 with an area of 300 sq.m. Sometime in June 2008, Mrs. Cualing noticed that you have mistakenly built your house on her property. You have already spent a considerable amount of money to build the ground foundation of your house as well as its major structural components and it is not feasible for you to buy the lot of Mrs. Cualing. As a result, you finally decided to exchange your property with that of the other and after thorough negotiations Mrs. Cualing agreed to swap her land with your realty on the condition that as the aggrieved party she will not shell out any amount for expenses related to the transfer of titles. To formalize your agreement you executed a Deed of Exchange, whereby both of you mutually concurred to swap your respective properties considering that there was merely an error and/or oversight on your part when you constructed your house on her land. In reply, please be informed that since there is no actual sale, exchange or voluntary disposition of real properties, but just a mere exchange without valuable consideration and considering that the conveyances were made merely for the purpose of correcting a mistake, the herein exchange of properties is therefore, not subject to capital gains tax under Section 24 (D) (1) of the Tax Code of 1997. Moreover, conveyances of realty to trustees or other persons without consideration is not taxable under Revenue Regulations No. 26 otherwise known as the Revised Documentary Stamp Tax Regulations. Thus, the Deed of Exchange executed by the parties which was made without monetary consideration is not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code, as amended. However, the notarial acknowledgement to said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Tax Code, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. AcDHCS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service